Mktx Logo

Image source: MarketAxess.

MarketAxess (NASDAQ:MKTX) reported third-quarter results on Wednesday. The global electronic bond trading network continues to benefit from the high level of efficiency and transparency that its platform provides to fixed-income investors.

MarketAxess results: The raw numbers

 

Q3 2015

Q3 2014

Growth (YOY)

Total trading volume

$239.7 billion

$182.1 billion

31.6%

Revenue

$74.2 million

$64.2 million

15.5%

Pre-tax income

$35.4 million

$28.3 million

25.1%

Diluted EPS

$0.60

$0.46 per share

30.4%

Data source: MarketAxess Q3 2015 press release.

What happened with MarketAxess this quarter?

  • MarketAxess continues to gobble up market share in U.S. high-grade corporate debt, with an estimated 17.3% share in Q3 2015, up from 14.6% in the third quarter of 2014.
  • The 31.6% jump in total trading volume on MarketAxess' platform to $239.7 billion helped variable transaction fees increase 26.3% to $48.0 million and commission revenue rise 19.7% to $65.2 million.
  • All other revenue -- consisting of information and post-trade services, technology products and services, and investment income -- fell 8% year over year to $9 million, primarily due to lower technology-related professional consulting services fees and the unfavorable impact of the strengthening U.S. dollar.
  • MarketAxess' operating leverage was again on full display in the third quarter. Total expenses increased only 8% to $38.8 million, mostly due to higher employee compensation and benefits costs. That helped pre-tax margin rise to 47.7%, compared to 44% in the year-ago quarter.
  • A lower effective tax rate (35.7% in Q3 2015 vs. 38.1% in Q3 2014) led net income growth to outpace pre-tax income growth, jumping 29.7% (vs. 25.1% pre-tax) to $22.7 million.
  • MarketAxess continues to maintain a pristine balance sheet; as of Sept. 30, 2015, the company had no debt and $255.9 million in cash and investments.
  • And management remains committed to returning cash to shareholders; MarketAxess purchased 57,801 shares during the third quarter at a cost of $5.6 million (averaging to about $97 per share). As of Sept. 30, 2015, approximately $42 million was available for future repurchases under its $100 million share repurchase program.
  • In addition, MarketAxess' board of directors declared a quarterly cash dividend of $0.20 per share to be paid on Nov. 18, 2015, to stockholders of record as of the close of business on Nov. 4, 2015.

What management had to say
"Our third quarter results reflect strong market share gains across all of our core products," said Chairman and CEO Richard M. McVey in a press release. 

In spite of less favorable credit market conditions during the quarter, we reached record estimated market share levels in both U.S. high-grade and high-yield bonds. Adoption of our Open Trading solutions is growing and we saw new records during the quarter for Open Trading volume and trade count. We continue to increase our investment in all-to-all technology solutions to address liquidity challenges in the market. Our European business shows strong growth and MIFID II is likely to create additional opportunities for e-trading, post-trade regulatory reporting, and data products.

Looking forward
With the long-term shift toward trading bonds over electronic platforms still in its early innings (most bonds are actually still traded over the phone), first-mover and industry leader MarketAxess remains well positioned to profit from this massive trend.

Joe Tenebruso has no position in any stocks mentioned. The Motley Fool recommends MarketAxess Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.